dozer, from that article, GS appears to have called a few things correctly.
As much as they leave a bad taste in my mouth, they did say in March 08 that the US was in recession. This was something everyone else (especially CNBC twits!) denied.
GS was right.
The thing that stands out for me from that article is this:
"The core of our 'super-spike' view is that oil prices will keep rising until demand declines globally on a multiyear basis, resulting in the return of excess capacity and a lower cost structure," Goldman's analysts said. "Given this view, once excess capacity returns, we think prices can move sharply lower."
multiyear basis??? Try multiweek basis GS!
Well, we now have gobs of excess capacity and yet their new forecast for the next 6 months ignores it completely.
That excess capacity is not going away any time soon.
A technical US recession may end any day, as defined by negative growth, simply because things cannot contract to zero.
A minimum level that is required just to sustain life will eventually be reached and contraction will cease.
This does not mean that growth will instantly ensue and gobble up all that excess oil capacity.
If recession was measured not by GDP, but by GDP free cash flow, the US will be in recession for years to come. In 2009 alone, a forecast deficit of $1.8 trillion is probably 20% or more of 2009 GDP. That is serious contraction!
(from what I read, the true deficit is closer to $4 trillion)
GS is apparently trying to have their cake and eat it too.
Someone pass me a fork.
S&P |
